Supply of goods in a distance selling contract: the Judicial competence and the role of the Incoterm Go back »

2011-11-02 | Nanjing

An important decision from the European Court of Justice (Case C-87/10) (Third Chamber) of 9 June 2011, Electrosteel Europe SA vs Edil Centro SpA, shall alert all the buyers and sellers dealing with the European company especially in drafting the agreement.

The core question for the judge has been what are the requirements of clauses that identify the place of delivery and what happens in case the contract does not contain any.

To determine whether, in the event of sale of goods, the place of delivery be determined "under the contract," the European Court of Justice court seized must take into account the terms and clauses that are appropriate to identify that place and also including the Incoterms!

The principle enunciated by the Court of Justice would seem to change the previous interpretation , where the indication of an Incoterms in the contract would be likely to clarify the allocation of transport costs and risks, but not to incorporate an agreement about the place of delivery.

Background

This case concerns the interpretation of Article 5(1) of the Brussels I Regulation on the place of delivery in a contract for the supply of goods in a distance selling contract. 

An Italian seller provided goods to a French buyer, by way of a delivery made to a carrier based in Italy who then transported the goods to France. A dispute between the parties arose, whether the Italian or the French courts would have jurisdiction, the latter being based on the place of delivery of the goods.

The Court was therefore asked to determine whether “delivery” was affected in the place where the goods were provided to the carrier (Italy) or the place of the goods’ final destination (France).

The goods being handed to a carrier was not enough to designate a place of delivery. 

An additional movement of goods, of which the buyer was unaware of in advance, would be irrelevant to the location of the place of delivery. In sales transactions, the usage of the final destination as the place of delivery seems to apply not only in distance selling contracts but also on the seller’s premises if that is where the buyer takes delivery of the goods. 

The decisive factor is the physical delivery to the buyer.  The Advocate General finally noted that physical delivery is sufficient to characterize the place of delivery.

In order to verify whether the place of delivery is determined 'under the contract', the national court seized must take account of all the relevant terms and clauses of that contract which are capable of clearly identifying that place, including terms and clauses which are generally recognized and applied through the usages of international trade or commerce, such as the Incoterms drawn up by the International Chamber of Commerce in the version published in 2000.

If it is impossible to determine the place of delivery on that basis, without referring to the substantive law applicable to the contract, the place of delivery is the place where the physical transfer of the goods took place, as a result of which the purchaser obtained, or should have obtained, actual power of disposal over those goods at the final destination of the sales transaction.

Conclusions

In contrast with the previous address  indicating that the Incoterms would be appropriate to clarify the allocation of transport costs and risk, but not to supplement an agreement regarding the place of delivery of goods, the EC Court of Justice has sought to give prominence to the wider use of International Trade and Incoterms.

Therefore traders who carry trades in EU shall take into account these developments and assess whether or not change their business practices.

In particular, vendors dealing with the UE Community should take into account that in the absence of adequate agreement the foreign buyer could begin a lawsuit in the courts of his country.

In this regard certainly seems advisable to use - and especially the exact quote in the text of the agreement - Incoterms ® 2010 currently in force.

For more information please send an email to: c.dandrea@picozzimorigi.it 
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